Some Endava plc (NYSE:DAVA) Analysts Just Made A Major Cut To Next Year's Estimates

The analysts covering Endava plc (NYSE:DAVA) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for next year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting analysts have soured majorly on the business.

Following the downgrade, the latest consensus from Endava's nine analysts is for revenues of UK£855m in 2024, which would reflect a solid 8.8% improvement in sales compared to the last 12 months. Statutory earnings per share are anticipated to dip 5.4% to UK£1.63 in the same period. Previously, the analysts had been modelling revenues of UK£959m and earnings per share (EPS) of UK£1.89 in 2024. Indeed, we can see that the analysts are a lot more bearish about Endava's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Endava

It'll come as no surprise then, to learn that the analysts have cut their price target 18% to UK£60.49. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Endava, with the most bullish analyst valuing it at UK£103 and the most bearish at UK£52.74 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Endava's revenue growth is expected to slow, with the forecast 7.0% annualised growth rate until the end of 2024 being well below the historical 27% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 11% annually. Factoring in the forecast slowdown in growth, it seems obvious that Endava is also expected to grow slower than other industry participants.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Endava. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Endava's revenues are expected to grow slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Endava.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for Endava going out to 2025, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.